It's pretty clear most tax preparers are reluctant to provide a comfort letter since the lender is trying to shift Liability.
Has any EA, CPA, or tax preparer ever been held liable for sending this letter?
BerkshireCPA wrote:Many years ago (around 2006) my partner issued some type of comfort letter and the client ended up defaulting on the loan and filing for bankruptcy. We received a copy of the original letter issued in the mail asking us to confirm if we wrote letter. Not sure but I think it was from Fannie Mae
Handed the request over to a lawyer and he responded and we never heard another thing.
I have never heard or read of a CPA being held liable for writing one.
Of course we would never issue one again
southparkcpa wrote:Similar thing happened to me a few years ago except I do NOT write the letter. My then client forged it and gave it to bank.
Seaside CPA wrote:The last couple I have had request them, I told them I could not provide the letter. Both lenders told clients they required them. I advised client that they should find another lender, that everyone did not require them. Both got the loans without the letter. That is going to be my approach now-tell them to tell the lender I advised them to take their business to someone that didn’t require it.
ItDepends wrote:It's WAY beyond scope.
We are engaged to prepare the Federal and State corporate income tax returns for XX Corporation.
It is our understanding that YY owns 100% of the stock of XX Corporation.
Our services, including this letter, are based on information provided to our firm by the officers and management of XX Corporation. We have relied upon their representation that the information they provided to us was complete and accurate to the best of their knowledge. We have not audited, reviewed or otherwise verified any of this information.
We are engaged to prepare the 2020 Federal and State individual income tax returns for [Name]. These income tax returns include a Schedule C for [Name] under the business name [Business Name] located at [Address].
In the process of preparing their income tax returns, [Name] have represented to us that their business remains active and will continue to be active into the foreseeable future.
Our services, including this letter, are based on information provided to our firm by [Name]. In preparing these returns, we relied upon their representation that the information they provided to us was complete and accurate to the best of their knowledge.
We have not audited, reviewed or otherwise verified any of this information.
Wiles wrote:A comfort letter is neither an attestation nor a certification. It's the same standard we are agreeing to when we sign the tax return.
Wiles wrote:As somewhat of an aside, if there was truly no liability exposure for any of us in providing this letter, then there is truly no value in us providing it.
There is value to our client who wants to get a loan and to the underwriter who wants to check a box.
Wiles wrote:But refusing to write comfort letters for my clients is not the remedy.
I will spend more time fighting my client and the underwriter over the request than I will kicking out one of these meaningless letters. And no bad will.
Wiles wrote:A comfort letter is neither an attestation nor a certification. It's the same standard we are agreeing to when we sign the tax return. Here are examples of my most recent letters:We are engaged to prepare the Federal and State corporate income tax returns for XX Corporation.
It is our understanding that YY owns 100% of the stock of XX Corporation.
Our services, including this letter, are based on information provided to our firm by the officers and management of XX Corporation. We have relied upon their representation that the information they provided to us was complete and accurate to the best of their knowledge. We have not audited, reviewed or otherwise verified any of this information.We are engaged to prepare the 2020 Federal and State individual income tax returns for [Name]. These income tax returns include a Schedule C for [Name] under the business name [Business Name] located at [Address].
In the process of preparing their income tax returns, [Name] have represented to us that their business remains active and will continue to be active into the foreseeable future.
Our services, including this letter, are based on information provided to our firm by [Name]. In preparing these returns, we relied upon their representation that the information they provided to us was complete and accurate to the best of their knowledge.
We have not audited, reviewed or otherwise verified any of this information.
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